GST shines on renewable energy sector

July 4, 2017 — INDOLINK Consulting (es)

Source: The Economic Times, Jul 04, 2017

NEW DELHI: The renewable energy sector is quite content with GST provisions. Contrary to earlier fears of sale of solar equipment – panels, modules and inverters – being taxed at high rates, the GST on such sales has been set at 5 per cent.

“The net effect on solar projects will be 3.5-4.5 per cent,” said Raj Prabhu, co-founder and CEO of Mercom Capital Group, which tracks the segment. “There will be issues with power purchase agreements as they will vary from state to state but 5 per cent GST is much more palatable than the expected 18 per cent.”

The only worry is that for very small installations of 100 kw in residential sector, solar inverters used will invite 28 per cent GST.

Similarly, in wind segment, sale of turbines and other equipment will attract GST of 5 per cent, the same as VAT did earlier. However, most wind equipment manufacturers also take on the task of setting up projects for developers, and this being a service, will attract 18 per cent GST, up from 12 per cent tax on engineering services earlier. “All engineering services are currently in 18 per cent bracket,” said D V Giri, secretary general, Indian Wind Turbine Manufacturers Association.

“We have asked for the entire gamut to be brought into 5 per cent slab.”

Solar projects involving civil and works contracts will be taxed at 18 per cent.

“There will be an increase in solar tariffs to which key contributors will be operation and maintenance, component costs and civil, works contracts,” said Prabhu.